Amazon Drops California In Growing E-Commerce Affiliate Tax Law War

In the ongoing state-by-state battle over tax collection on affiliate website sales, this afternoon Amazon warned thousands of affiliates their revenue streams would be shut off if a tax bill would be signed into law. Mere hours later,Governor Jerry Brown signed the bill, signifying tough times ahead for many online business owners.

States are scrambling for cash, so it’s no surprise they see a pot of gold in e-commerce sales. Brick and mortar sites – such as Wal-Mart – that have failed to grasp the opportunities Amazon created with programs (like Affiliates) are out for blood.

Essentially, certain states have grubbed for tax money by passing laws that expand the definition of physical presence. They are specifically targeting e-commerce sites that work with affiliates – more specifically, websites that partner with Amazon as Affiliates to earn commissions from individual sales.

Last year Colorado signed a new law that extended nexus to e-commerce affiliates. The law required online retailers like Amazon to give Colorado residents a bill on how much they owe in sales tax on web purchases, and provide summaries of individual web purchases to the state. Amazon responded, as like with California, for better or worse, by cutting off its Colorado affiliates.